Research & Commentary: CMS Approves Kentucky’s Waiver, Other States Should Follow Suit

In this Research & Commentary, Matthew Glans examines the Medicaid waiver recently approved for Kentucky and argues it could be a model for other states to follow as they reform their own Medicaid programs.

Medicaid expansion has placed a severe financial strain on state budgets, especially in those states that expanded the program under the provisions of the Affordable Care Act. Several states – including Arizona, Arkansas, Indiana, Kansas, Kentucky, Maine, New Hampshire, North Carolina, Utah, and Wisconsin – have submitted waivers to the Centers for Medicare and Medicaid Services (CMS) to implement Medicaid overhauls that would include reforms such as work requirements and cost-sharing.

In January 2018, Kentucky became the first state to have a Medicaid waiver that includes major reforms, such as work requirements, approved by CMS. Kentucky Gov. Matt Bevin (R) first outlined Kentucky’s waiver, titled KentuckyHEALTH, in August 2016. The waiver permits the state to require all “able-bodied working age adult members without dependents” (ABODS) to meet certain work requirements, undergo job training, or perform volunteer community service to continue receiving Medicaid benefits. ABODS would have to work or volunteer at least 20 hours per week. Bevin estimates the changes will save the state $2.4 billion over five years.

KentuckyHEALTH also allows the creation of monthly premiums, which will range from $1 to $15, for able-bodied adult Medicaid recipients. Those failing to pay the premiums would be temporarily locked out of Medicaid for six months or dropped to a more limited plan. Those locked out would be able to return through what the proposal calls “on ramps.” One alternative to the monthly premium would allow enrollees to pay a fixed amount every time they see the doctor.

Work requirements, the center of the approved Kentucky waiver, have proven to be successful in the past when introduced in other entitlement programs. They reduce poverty by encouraging work and self-reliance. The new work requirements now being considered by other states are modeled on similar work requirements that were adopted as part of the 1996 welfare reform legislation signed into law by President Bill Clinton. In a study examining the effect of the reform, the Manhattan Institute found the inclusion of work requirements led to substantial reductions in poverty nationwide.

Medicaid should focus on encouraging able-bodied recipients who are enrolled in these programs to become more self-sufficient and less dependent on government aid. The real focus of these programs must be to provide temporary or supplemental assistance while encouraging work and independence. The waiver process gives states the flexibility they need to improve health care affordability and quality of care.

State lawmakers currently waiting for the federal government to approve health care reforms should instead apply for waivers from the U.S. Department of Health and Human Services to allow for more control over Medicaid programs. And Kentucky’s waiver should serve as a model – one that should be expanded on – for other states interested in implementing reforms but unsure of what will be approved by CMS.

Work requirements help people move from government dependency to self-sufficiency, which is what welfare programs should be designed to do and what all lawmakers should strive to achieve.

The following documents examine Medicaid reform in greater detail.

Don’t Wait for Congress to Fix Health Carehttps://www.heartland.org/publications.../dont-wait-for-congress-to-fix-health-care
In this Policy Brief, Heartland Senior Policy Analyst Matthew Glans documents the failure of Medicaid to deliver quality care to the nation’s poor and disabled, even as it drives health care spending to unsustainable heights. Glans argues states can follow the successful examples of Florida and Rhode Island to reform their Medicaid programs, or submit even more ambitious requests for waivers to the Department of Health and Human Services – a suggestion the Trump administration has encouraged.

The Personal Health Care Safety Net Medicaid Fixhttps://www.heartland.org/publications-resources/publications/personal-health-care-safety-net-medicaid-fix
This article by Justin Haskins, Michael Hamilton, and S.T. Karnick of The Heartland Institute outlines a proposed reform plan for Medicaid, the Personal Health Care Safety Net Medicaid Fix. The authors say their Medicaid Fix would expand patient choice and give each Medicaid enrollee real money, not false promises, in the form of a personal safety net that would empower even the poorest of families to take care of itself and give more than 70 million Americans access to the private health insurance market.

Work Requirements Are Working for Kansas Families: How Welfare Reform Increases Incomes and Improves Liveshttps://thefga.org/wp-content/uploads/2017/07/Work-Requirements-are-Working-for-Kansas-Families.pdf
In this study, Nic Horton and Jonathan Ingram of the Foundation for Government Accountability examine Kansas’ welfare reforms and how recipients fared after leaving the program. Their results found the reforms have led to more employment, higher incomes, and less dependency on government services.

Poverty After Welfare Reformhttps://www.manhattan-institute.org/html/poverty-after-welfare-reform.html
In this Manhattan Institute study, Scott Winship examines the effect of the welfare reforms implemented in the 1990s on poverty: “Deep child poverty was as low in 2014 as it had been since at least 1979 after including refundable tax credits and noncash benefits (other than health coverage) in income, counting household heads’ cohabiting partners as family, and applying the best cost-of-living adjustment to the poverty line. Adding health benefits indicates that deep child poverty was lower by 0.3 percentage points in 2014 than in 1996, and lower than any other year going back to 1979,” wrote Winship.

Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this subject, visit The Heartland Institute’s website, and PolicyBot, Heartland’s free online research database.

If you have any questions about this issue or The Heartland Institute’s website, contact John Nothdurft, The Heartland Institute’s government relations director, at john@heartland.org or 312/377-4000.